In a significant move for the crypto industry, the US Securities and Exchange Commission (SEC) has reached a settlement with Plutus Lending, the entity behind the crypto lending platform Abra. This settlement comes in response to allegations that Abra sold unregistered securities to consumers and operated as an unregistered investment company.
Abra Earn Program Under Scrutiny
Abra’s flagship offering, the Abra Earn program, allowed retail investors to deposit their crypto assets in exchange for interest, promising high returns with minimal effort. At its zenith, the Earn program managed approximately $600 million in assets, with nearly $500 million of this coming from US investors, according to the SEC’s recent statement.
The SEC’s complaint accuses Abra of engaging in “discretionary investment practices” to generate high returns, maintaining 40% of its total assets in investment securities. This included loans of crypto assets to institutional borrowers. For two years, Abra allegedly operated as an “unregistered investment company” by issuing what the SEC considers unregistered “securities.”
In June 2023, Abra began winding down the Earn program and instructed US customers to withdraw their assets, signaling the company’s response to the escalating scrutiny.
SEC’s Concerns and the Path Forward
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, highlighted the crucial role of registration laws in protecting investors. She stated, “As alleged, Abra sold nearly half a billion dollars of securities to US investors, without complying with registration laws designed to ensure that investors have sufficient, accurate information to make informed decisions before they invest.”
Abra’s investor roster included notable names such as Amex Ventures, Blockchain Capital, and the Stellar Development Foundation, which once propelled the startup’s valuation to $500 million. However, the crypto lending sector has seen turmoil recently, with other platforms like BlockFi, Celsius, and Voyager filing for bankruptcy in 2022.
In light of these events, an Abra spokesperson assured that no harm came to consumers due to the settlement or the Earn program’s closure. US-based Earn customers had their assets and accrued interest transferred to their Abra Trade accounts in 2023. Abra continues to operate in the US through Abra Capital Management, an SEC-registered investment adviser, ensuring ongoing compliance and investor protection.
Also Read: SEC Slams Brothers With $60 Million Crypto Ponzi Scheme – 80+ Investors Duped, $54 Million Misused
Market Impact
As of now, the total crypto market capitalization stands at $2.1 trillion, experiencing a brief spike to $2.23 trillion over the weekend. Bitcoin (BTC), the largest cryptocurrency by market cap, is trading at $63,100, down nearly 2% in the last 24 hours.
The settlement between the SEC and Abra underscores the increasing regulatory scrutiny facing the crypto lending sector and serves as a reminder of the importance of compliance in safeguarding investor interests in the rapidly evolving digital finance landscape.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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